Enterprise Risk Management

  • 1.  Linking employee compensation to risk management practices

    Posted 02-21-2009 12:30 AM
    I'm interested in discussing the topic of broadly linking employee compensation to risk management practices. In researching this topic, I have only found very general statements suggesting that it's either "a good idea" or "recommended practice." After additional searches on performance management programs, my results do not indicate that companies typically consider or promote risk management measures into their scorecards or reporting mechanisms.
    • Do you believe linking compensation to risk management is an important characteristic to an ERM program?
    • At what grade level(s) do you think such a metric might prompt incremental progress toward obtaining business goals or objectives?
    • Would risk metrics support increased accountability within an organization?
    • Does the maturity of your risk management program matter to implement risk metrics?

    If you have researched and/or implemented such a program at your company, I'd be interested in listening to your thoughts and suggestions on this matter. Alternatively, if anyone has come across any relevant articles or studies on this topic, please post a link or summary to further prompt this discussion.

    Regards, -E

    -------------------------------------------
    Eric Benson
    Business Risk Manager
    UnitedHealth Group
    Minnetonka MN
    United States
    eric_c_benson@uhc.com
    -------------------------------------------


  • 2.  RE:Linking employee compensation to risk management practices

    Posted 02-23-2009 11:52 AM
    Leaders in the ERM field say that linking ERM initiatives to compensation is a "must" for it to work. I would agree with that. The risk maturity and the risk appetite of senior leaders is a make or break component for ERM activity. Beware of metrics for the the sake of simply saying you have risk metrics. They can be very time consuming (labor intensive) and yield little positive results unless they are well constructed and updated on a timely basis. My questions to anyone using metrics is what are they going to be used for and for the time (expense) they are taking, are they going to benefit the firm in anyway. If you would like to speak on this further, I'd be happy to chat with you directly.

    -------------------------------------------
    Helen Beckschi
    Enterprise Risk, Manager
    Hewitt Associates, LLC
    Bridgewater NJ
    United States
    Helen.Beckschi@hewitt.com
    -------------------------------------------






    Original Message


  • 3.  RE:Linking employee compensation to risk management practices

    Posted 04-01-2009 08:24 PM
    Eric:

    I think this is the necessary next step to truly realize the value of risk management. Unless and until the "rubber meets the road" regarding active support of proper risk practices I am confident any risk management program will plateau sooner than we can imagine.

    Having said that, it does not have to be overly complex or too "HR ish" to work. Simply having a shared objective for employees to actively contribute toward improving the control environment and/or enhancing the decision making process by incorporating risk considerations in to business decisions is enough to get the ball rolling.

    They have to be able to say, at the end of the year, did I contribute to helping the firm grow and meet its objectives while actively managing the risks that go along with that?

    It keeps us protected from the "growth for the sake of growth" approach that has gotten so many firms in trouble.

    ..my two cents...


    -------------------------------------------
    Jeffrey Vernor
    Global Risk Manager
    Russell Investments
    Tacoma WA
    United States
    jvernor@russell.com
    -------------------------------------------






    Original Message